19900912Response.pdf

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Mrs. Myrna J. Walters
Secretary
Idaho Public Utilities Commission
Statehouse
Boise, Idaho 83720
RE: Case No. IPC.E.90.2
Response of Idaho Power
Dear Mrs. Walters:
P!ease find enclosed for filng an original and seven (7) copies of the
Response of Idaho Power Company regarding the Comments of Staff and Parties
in the above entitled matter.
If you have any questions, please feel free to call me.
Sincerely,
LDR:mka
Enclosures
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LARRY D. RI PLEY
c/o Idaho Power Company
1220 West Idaho Street
P.O. Box 70
Boise, Idaho 83707
[phone]
STEVEN L. HERNDON
IDAHO POWER COMPANY
1220 West Idaho Street
P.O. Box 70
Boise, Idaho 83707
[phone]
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Attorneys for Idaho Power Company
FAX [phone]
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO RATE BASE THE
REBUILD OF THE SWAN FALLS
HYDROELECTRIC FACILITY.
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CASE NO. IPC-E-90-2
RESPONSE OF IDAHO POWER COMPANY
TO COMMENTS OF STAFF AND PARTIES
IN THE SWAN FALLS PROCEEDING
At the prehearing conference held on August 22, 1990, it was agreed
that the Commission Staff (Staff) and other interested Parties (Parties) could
file statements of position concerning Idaho Power's Application in this
proceeding. The Commission Staff (Staff), Industrial Customers of Idaho Power
(ICIP), Afton Energy, Inc. (Afton), and Idaho Consumer Affairs, Inc. (ICA), have
fi 1 ed such statements.
Idaho Power Company (Idaho Power) agrees that an evidentiary hearing
is not required. While legal issues have been raised by Staff and the parties,
those issues are more appropriately addressed by written submissions to the
Commission. In making this response, Idaho Power recognizes that all parties
will be given additional time to fully brief the issues that have been raised
before the Commission makes a final decision.
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STAFF ISSUE
The Staff has set forth the fo 11 owi ng 1 ega 1 issue:
The amount of investment in plant to be included in rate base is not
to be decided in this case. Once the plant is in service, the Staff proposes
that the amount to be included in rate base should be the lesser of these three
figures:
a. The plant costs reasonably incurred in reconstruction of Swan
Falls;
b. The avoided costs of Idaho Power, appropriately calculated to
take into account the difference between the Swan Falls plant's expected useful
1 i fe and the contractu a 1 commi tment of a cogenerator or small power producer; or
c. Idaho Power's proposed cap on rate base contained in its
Appl ication.
COMPANY RESPONSE
The amount to included in rate base upon comp 1 et i on of the
reconstruction of Swan Falls should be the plant costs reasonably incurred in
reconstructing Swan Falls, limited only by the cap on rate base that Idaho Power
is willing to voluntarily impose. It is not appropriate or lawful to utilize
some type of avoi ded cost cal cul at i on to determi ne Idaho Power's investment for
ratebase purposes.
The Company concurs that the actual amount of investment to be
included in rate base can only be determined after the reconstruction of Swan
Fall sis completed. However, if the amount actua 11 y incurred is below the cap
proposed by Idaho, it is the position of Idaho Power that the amount actually
incurred must be recognized in the calculation of Idaho Power's rate base for
revenue requi rement purposes.
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ICIP ISSUES
The ICIP has set forth the following legal issues:
1. Idaho Power's Swan Falls Application requesting pre-approval
for rate making purposes of the Company's construction costs for the project, up
to the amounts of the Swan Falls Commitment Estimate should be rejected. The
project shoul d not be recogni zed for rate maki ng purposes until it is ope rat i ona 1
and shown to be used and useful to Idaho Power's rate payers.
2. Since the Swan Falls facility has been certified, once that
facility has become operational, following the Company's rehabilitation of the
project, the avoided cost standard should be used by the Commission as a "cap"
on rate recogni t i on of Idaho Power's expendi tures.
COMPANY RESPONSE
Idaho Power is required to apply to the Commission for an order
authorizing the Swan Falls reconstruction for purposes of determining the amount
of investment that will be included in rate base when the Swan Falls
reconstruct ion is completed. There wi 11 be no change in the Company's rates
until a revenue requirement proceeding has been initiated by the Company and the
Commission has determined the new revenue requirement of Idaho Power and the
resulting rates. In that revenue requirement proceeding, if the Swan Falls
reconstruction is completed, the investment reasonably incurred by the Company
up to the amount of the voluntary cap proposed by Idaho Power Company, would be
included as a part of the Company's investment for purposes of determining the
Company's revenue requirement.
As stated in the Company's response to Staff's position, the
Commission's avoided cost determinations cannot be utilized fairly for
establishing the revenue requirement (and resulting rates to be charged) for a
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public utility. How such a Ilcap on rate recognition" would be calculated and
util ized has not been set forth and the Company is not sure how the Staff or ICIP
woul d propose to cal cul ate such a cap.
AFTON ISSUES
Afton has set forth the fo 11 owi ng 1 ega 1 issues:
1. To the extent that Idaho Power asserts that the Swan Fall s
project has unique project values such as senior water rights that justify higher
prices than available from qualified facilities, Idaho Power's shareholders
should pay for such unique benefits and not ratepayers through higher energy
costs. Idaho Power's shareholders will own the Swan Falls project together with
the water ri ghts, and the costs in excess of compet it i ve generation a 1 ternat i ves
should be fully allocated to Idaho Power's shareholders.
2. Idaho Power's ratepayers should pay for least cost electrical
generat i on and not generat i on resources wh i ch have an i nfl ated pri ce with
sign i fi cant front end costs. Any other pub 1 i c pol icy of acqui ri ng generat ion
resource other than a 1 east cost methodology can only result in unnecessary
increases in ratepayer costs and damage to the Idaho economy.
COMPANY RESPONSE
The Swan Falls Project does have unique project values such as senior
water rights, and the reconstruction of the Swan Falls project will protect those
water ri ghts. The cost of reconstruction of the dam for that reason, as well as
for safety purposes, and the meeting of the other conditions imposed by FERC, are
costs that wi 11 be reasonably incurred and wi 11 benefi t ratepayers.
The reconstruction of the Swan Falls facility in compliance with the
FERC license is in the public interest and all the costs reasonably incurred in
that reconstruction should be included in the Company's investment for ratemaking
purposes.
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ICA ISSUES
ICA has set forth the following legal issues:
The hydraul i c capaci ty of the Swan Fall s dam has not been fully
util ized and ICA questions whether Idaho Power has sufficient water rights which
may requ ire mod i fi cat i on of state 1 aw or the i mpos i t i on of a moratori um on new
electrical irrigation hookups. ICA also desires that the Commission investigate
boat launching facilities, picnic facilities, and restrooms.
COMPANY RESPONSE
The hydraul i c capaci ty of the Swan Fall s Dam has been determi ned by
the Federal Energy Regulatory Commission upon the issuance of the FERC license.
Company personnel have been in contact with the ICA representative and have
pointed out to the ICA representative that its comments related to hydraul ic
capac i ty ut i 1 i ze peak flows as opposed to average flows.
The Company does not bel ieve that this is the proper forum to discuss
water rights nor is this a proceeding wherein a moratorium on new electrical
irrigation hookups should be taken up. Boat launching facilities, picnic
facilities, and restrooms are issues which are considered by FERC when issuing
ali cense for a hydro project.
CONCLUSION AND RECOMMENDATION
Based upon the comments received, an evidentiary proceeding on the
Company's Appl ication for authority to rate base the investment required for the
rebuild of the Swan Falls hydroelectric facility is not required. The issues
that have been presented concerning the Company's Application can be resolved by
the submission of written briefs.
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WHEREFORE, it is the recommendation of Idaho Power that after receipt
of any Reply Statements, the Commission should issue its Order implementing the
fo 11 owi ng procedures for process i ng the Swan F all s App 1 i cat ion.
A. The Commission should issue an Order determining that the legal
issues as discussed above are the issues to be determi ned by the Commi ss i on as
a result of Idaho Power's Application in this proceeding.
B. Those Parties that desire to contend that the Commission's
Avoided Cost Determinations for Idaho Power Company can be util ized to calcul ate
Idaho Power's investment for rate base purposes should file their specific
proposa 1 s as to how that cal cul at ion woul d be performed by a date to be set by
the Commi ss i on.
C. Twenty (20) days after receipt of proposals for util izing
avoi ded costs inca 1 cul at i ng a uti 1 i ty' s investment for rate base purposes, Idaho
Power would be permitted to set forth its position as to all issues raised in the
Commi ss i on's Order.
D. The Staff and Parties would be given twenty (20) days to file
responses to Idaho Power's pos i t i on statement.
E. Idaho Power would be given twenty (20) days to reply to Staff
and Parties' responses.
F. After receipt of all written statements the Commission would
issue its Order on the Company's Swan Falls Application.
Dated this 12th day of September, 1990 in Boise, Idaho
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Attorney for Idaho Power C mpany
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.cERTIFICATE OF SEF.VICE
I HEREBY CERT I FY that I have th is 12th day of September, 1990,
served the foregoi ng RESPONSE OF IDAHO POWER COMPANY TO COMMENTS OF STAFF AND
PARTIES, to all parties of record by hand delivering a copy thereof, to the
following:
Afton Energy, Inc.
c/o Owen H. Orndorff
Orndorff & Peterson
1087 West Ri ver Street - Ste. 230
Boise, Idaho 83707-0027
R. Scott Pasl ey
Assistant General Counsel
J. R. Simplot Company
P.O. Box 27
Boi se, Idaho 83707 -0027
R. Mi chae 1 Southcombe, Esq.
CLEMONS, COSHO & HUMPHREY
815 West Washington
Boi se, Idaho 83702-5590
David H. Hawk, Director
Energy Natural Resources
J. R. Simplot Company
P.O. Box 27
Boi se, Idaho 83707 -0027
Peter Richardson
DAVIS, WRIGHT, TREMAINE
350 North Ni nth Street
Suite 400
Boi se, Idaho 83702
Michael S. Gilmore (2)
Brad M. Purdy
Idaho Public Utilities Comission
472 West Washi ngton
Boi se, Idaho 83720
and by causing a copy thereof to be del ivered by Federal Express to:
James N. Roethe, Esq.
PILLSBURY, MADISON, SUTRO
225 Bush Street
San Franci sco, CA 94140
Grant E. Tanner
DAVIS, WRIGHT, TREMAINE
2300 Fi rst Interstate Bank Tower
1300 SW Fifth Avenue - Ste. 2300
Port 1 and, Oregon 97201
and due to the fact Mr. Mi 1 es had another commi tment I have caused the copy to
be mailed to Mr. Miles at the following address:
Harold C. Miles, Chairman
Idaho Consumer Affairs, Inc.
316 15th Avenue South
Nampa, Idaho 83651